In this paper we study equilibrium- and experimental bidding behaviour in first-price and second price auctions with outside options. We find that bidders do respond to outside options and to variations of common knowledge about competitors' outside options. However, overbidding in first-price...

Deviations from equilibrium bids in auctions can be related to inconsistent expectations with correct best replies (see Eyster and Rabin, 2005; Crawford and Iriberri, 2007) or correct expectations but small (perhaps quantal-response) mistakes in best replies (see Goeree et al., 2002). To distinguish...

Recent research suggests that auction winners sometimes fall prey to a "bidder's curse", paying more for an item at auction than they would have paid at a posted price. One explanation for this phenomenon is that bidders are inattentive to posted prices. We develop a model in which bidders'...

Recent research suggests that auction winners sometimes fall prey to a "bidder's curse", paying more for an item at auction than they would have paid at a posted price. One explanation for this phenomenon is that bidders are inattentive to posted prices. We develop a model in which bidders'...

We explore experimentally how power asymmetries between partners affect relationship-specific investments. We find that on average players' investments are larger than equilibrium investments. In contrast to social dilemma experiments, in our experiment preferences for social welfare and those...

Deviations from equilibrium bids in auctions can be related to inconsistent expectations with correct best replies (see Eyster and Rabin, 2005; Crawford and Iriberri, 2007) or correct expectations but small (perhaps quantal-response) mistakes in best replies (see Goeree et al., 2002). To distinguish...

We present the first laboratory study showing that concerns for social welfare are key determinants of investment behavior in a world of incomplete contracting. Two equally productive players simultaneously decide how much to invest into a joint production process. The total monetary benefit...

We generate observable expectations about fiscal variables through laboratory experiments using real world data from several European countries as stimuli. We compare a VAR model of expectations for data which is presented in a fiscal frame with one for neutrally presented data. We measure the...